The oil rout we’ve seen in recent weeks that has obliterated Canadian and American producers has been unprecedented in a number of ways. Western Canadian Select dropped below the $10 U.S. per barrel level for the first time in history, and the price of WTI has hovered around $20 U.S. per barre l- of course, natural gas prices have not been spared as well.
In the case of Altagas Ltd. (TSX:ALA), there are a number of factors that I believe will help this stock perform better than many of its peers over the long run, for enterprising investors willing to jump into this market now and take the risk associated with low commodity/oil prices and the chance these prices could be sustained for some time.
Perhaps the most important factor investors should consider, in my opinion, is the fact that Altagas is diversified (though it did have to divest some of its best assets and split into two companies following the WGL acquisition debacle), and a meaningful percentage of the company’s revenue is generated through its regulated utility business. This allows for much more stable and consistent cash flow to complement its higher-risk, higher-reward natural gas business.
Fundamentally, Altagas has traded at a discount to its peers for some time, due in part to aforementioned issues around the WGL acquisition which was poorly timed and poorly structured.
Right now, Altagas trades at around three quarters the multiple of its peers, and looks particularly cheap given the commodity price rout which has removed nearly any semblance of optimism from this sector.
Invest wisely, my friends.
